Question : According to the law of diminishing marginal utility, as a consumer consumes more of a good:
Option 1: The total utility derived from the good increases at a decreasing rate.
Option 2: The marginal utility derived from the good increases at a decreasing rate.
Option 3: The total utility derived from the good decreases at a decreasing rate.
Option 4: The marginal utility derived from the good decreases at a decreasing rate.
Correct Answer: The marginal utility derived from the good decreases at a decreasing rate.
Solution : The answer is (d) The marginal utility derived from the good decreases at a decreasing rate.
The law of diminishing marginal utility states that as a consumer consumes more of a good, the marginal utility derived from each additional unit of the good decreases. This means that the first unit of the good provides the most utility, the second unit provides less utility, and so on.
The law of diminishing marginal utility is an important concept in economics because it helps us to understand how consumers make decisions about what goods and services to purchase. It also helps us to understand why demand curves are downward sloping.
